Time to Invest in Singapore Strata Offices Now?

Should you invest in Singapore Strata Offices in a post-pandemic Singapore? Is it the right time to invest in Singapore Strata Offices now? The biggest advantage of investing in it is that there is no additional buyers stamp duty (ABSD).

Investing in a strata office or commercial, doesn’t attract Additional Buyers Stamp Duty (ABSD). There is also no Sellers’ Stamp Duty (SSD). That is why we are discussing this EdgeProp article, Investing in Strata Offices in a Post-Pandemic World.

What is a Strata Office?

First and foremost, we have to ask ourselves, “what is a strata-title office?”

So for offices in Singapore, we can say that it actually runs under two kinds of categories. The first one will be your standard Grade-A offices, Typically, they will be run by a leasing company, because it is managed by a fund and it is not owned by an individual. The second that we are going to talk about, will be the strata title offices.

It means that you as the owner have the responsibility to find a tenant for your office space. So one of the biggest advantages of investing in strata title offices is that there are no ABSD. There is also no seller stamp duty, which means you can buy an office unit for one day and sell it the very next day without incurring any form of taxes. It is very flexible, and you can see that ABSD rates are on the hefty side these days, especially for PR, foreigners and even locals.

Strata Offices and Strata Shops

For this commercial sector, there are strata offices and also strata shops. It’s the same concept. Strata shops mean that you buy your own shop. So maybe this whole building has a hundred shops, so everybody can buy and you are free to rent out to whoever you want.

But my personal opinion is that I will choose to invest in Singapore strata offices over a strata shop. Why?

When you buy a strata shop, it is up to you to rent out. It is unlike being under a common fund or group, such as a land lease, where they will control the tenant mix. So that you can enjoy more crowd. But whereas for strata shops, landlords are free to rent out to their own tenants. There is no control and the shopping centre might not be attractive to attract the crowds.

A case in point is Katong Shopping Center. Golden Mile Complex is a good example too. The shopping centre became a place with a lot of maids’ agencies. So you only go there unless you’re looking to hire a helper. So you will not think of going there for shopping. So my personal opinion is that I’ll invest in Singapore strata offices over a strata shop.

Advantage of Strata Title Office over Residential Property

I have spoken to some investors before about the feelings for strata offices. There are two different kinds of mindsets when comparing a private residential tenant to an office tenant. A private residential tenant may be more emotional at times, especially when there needs to be ratification in the property.

Whereas a strata office tenant may not bother you so much. Because if you give them the space, you just let them do their thing. But when you’re dealing with a private residential tenant, they may have a lot of requests for the landlord.

Strong Demand for Office Space

On the third of June, The Business Times ran an article, titled, “Strong Leasing Interest for part of StanChart Space in MBFC”. A lot of people are moving towards homebased working or work-from-home. With the pandemic, a lot of people appreciate working from home. In my mind, I was thinking, would there be a drop in demand for offices?

In the early phase, I thought that there might be a drop in the office space, leading to a decline in rental prices. Surprisingly, this article on the 3rd of June mentioned that a lot of banks are giving up their office space. But the spaces they gave up had new takers.

So from this article, it mentions there is strong interest from the various companies, especially tech firms. So these tech firms are growing, so although the banking and finance industry has been decreasing their office footprint in CBD. We can say that the pandemic hastened this process as well.

So I will say that for bigger companies, especially MNCs, will definitely need an office space. Largely because of the corporate identity. They need to be at a good location, especially when you are talking about offices in the CBD area. These can be strata title offices at Raffles Place, Tanjong Pagar. If they are to go in, they will likely take out the whole floor or even a few stories. An example will be Marina One. FaceBook is there. Their office has the whole floor. To them, the location is important and they want to be seen as doing very well. Of course, they will need to see the building, but we can summarise that office demand will be there.

Industry Trends are Changing

Office demand will always be there, we just need to know who is the tenant. Last time, it is the banks. But in every pandemic or crisis, there will be some winners and some losers. When a trend dies off, something else will replace it. In this pandemic, the new trend is the stage for tech firms to shine. Tech and pharmaceuticals are growing because the pandemic created more need for medicine and tech.

The tenant profile or the tenant mix of these grade A offices is a very fair reflection of what are the dominant industries in the world these days. Five to seven years ago was banking and finance. Now is tech. Ten years later could be a different thing altogether.

A lot of China companies, such as Alibaba and Bytedance are coming to Singapore. Singapore stands to benefit from the decoupling between China and the US because we are a neutral ground between both parties.

This article caught my attention because it made me question if the information is correct. It doesn’t make sense to invest in strata title offices when people are working from home. But then I look at the supporting articles from The Business Times, where the title says, “Unconcerned landlords find plenty of takers for office space that banks vacate” on 10 June 2021…

This title is a bit “how lian”. Unconcerned landlords… That means good bye if you want to go. You don’t want this space right? I have another tech firm coming over. And you can really see that not only are these tech firms renting, they are buying. For example, Alibaba has a 50% stake in the XR tower, in the CBD area. That is also a grade A office. You can see how these Chinese tech firms perceive Singapore is completely different. They see a lot of potential and they place their bets on us.

Time to invest in Singapore Strata Offices?

Having said that, do you now think that investing in Singapore strata offices is something worth considering these days?

Lazada also came in. Bytedance took up 60,000 sqft at One Raffles Quay. They are coming from a Chinese titan itself. So I think office will still be there. But just curious, will you be interested to invest in an office?

For me, yes I would. Because it has no ABSD and you can sell anytime you want. You can find a decent office with $800,000 to $900,000. It’s not a big office, but still something sizeable.

I’m more into residential property investment. If I am to invest in an office, I will go for a shophouse office. Because shophouse has got character. The first floor will be a frontage for retail, whereas the second and third floors will be for those companies that want to have a bit of character. It will get more interior design firms or creative industries. Even boutique finance companies, because shophouse has a bit of status.

Setup a Company to Purchase Offices

Regardless of whether you want to invest in Singapore strata offices or shophouse offices, you should look at buying it under a company. There is a difference. Buying a strata title office under your own name doesn’t attract ABSD or SSD. But you an also buy under a company, that means you setup a new company purely to acquire this office.

What is the advantage?

If you are a GST-registered company, you will be able to claim back the GST itself. Because although offices don’t have ABSD or SSD, it has a GST component. At the end of the day, it’s a business decision. We will not go into details about this, but I know that most people who buy an office, strata title office or commercial will likely buy under a newly-registered company.

If you have any questions about this topic, please give us a comment. We will do our best to address it.

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